Geithner Stands Firm on Yuan

OCTOBER 18, 2010

Geithner Stands Firm on Yuan

By CASSANDRA SWEET

PALO ALTO, Calif.—Treasury Secretary Timothy Geithner said Monday the U.S. would not "engage" in devaluing its currency, but described China's currency as "significantly undervalued," as tensions between China and other countries remain high in advance of meetings of finance ministers and central bankers in South Korea this weekend.

Mr. Geithner's comments were among his most blunt on the Chinese currency and his sharpest retort to recent criticism from some countries that the U.S. government is pursuing policies aimed at reducing the value of the dollar to spur exports and economic growth.

"It's not going to happen in this country," Mr. Geithner said in remarks here. "The United States of America and no country in the world can devalue its way to competitiveness. It's not viable and we will not engage in it."

But Mr. Geithner said China's reluctance to unfetter its currency is "unfair to China's trading partners, including America, because it just creates a playing field that's unbalanced, provides near-term economic advantage to Chinese companies, and is damaging to what's important to everyone—that we operate in a world in which everyone operates according to rules."

He noted with approval, though, that since the beginning of September, China has allow the currency to rise somewhat faster than it did in the preceding weeks. "It has moved 3% in last couple of months," Mr. Geithner said. "We want to see that process continue."

Mr. Geithner is joining finance ministers from the Group of 20 leading nations at a meeting in South Korea later this week. The issue of China's currency is expected to be a central topic. Officials have talked about a potential multinational resolution to what some see as imbalanced currency policies, but so far no deal has been reached.

U.S. officials have struck a more aggressive stance with China in recent weeks. On one hand, officials have praised China for allowing its currency to climb recently, but they have said the appreciation hasn't been dramatic enough. Chinese officials, for their part, have blasted criticism of their policies, saying that a steep increase in their currency could prove devastating to their economy. U.S. officials are looking at whether they could enlist other Asian countries to help China move its currency more quickly. Chinese officials have suggested they aren't interested in such a regional plan.

On Friday, the Treasury Department said it would delay the release of a report on whether China and other nations "manipulate" their currencies.

The issue of China's currency dominated a recent Washington meeting of finance officials hosted by the International Monetary Fund from around the world, but little progress was made. This has raised the stakes for the November meeting of world leaders. U.S. officials see the currency debate as core to a broader effort of rebalancing trade and the global economy.